This blog is about macro-economics, financial markets and the world that has been pulled over your eyes to blind you from the truth.

— Neo: What truth?
— Morpheus: That you are a slave, Neo.

2010-07-16

Euro update

Here's what has become the accidental Euro update. Today was another very strong day for the Euro, which hit multi-month high against not only the bubble dollars (AUD and CAD) but also against the USD — even though it hit hard against the 1.30 resistance and failed to sustain the break out due to the big fall in the equity markets. Generally speaking, the whole week has been a pretty amazing one for the Euro, as you can see on the three charts below:

The previous week saw also a big reduction in terms of the speculative short positions against the Euro in the futures market, which confirms my forecasts from the past several weeks (chart courtesy of ZeroHedge).

I kind of guess that the massive rally in the euro has now brought this short covering rally to an end and that the positions should be about flat.

What will happen from here? I think the rally in the EUR/USD should have some more legs, even though we are getting probably closer to end. My target was about 1.35-1.40, I hope I'm going to be right, specially since Mish just posted a few minutes ago and is expecting a dollar bounce. I think it's a bit premature, at least against the Euro. Against the CAD and the AUD, the USD bounce has probably already started.

I'm expecting the EUR/USD to top when the speculative positions in the futures markets will hit 20000 — hopefully 40000, but that's a bit of a stretch.